Dáil Speech: High End Pensions Protected despite Budget Promises – Golden Circle of Government Wins Again

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Dáil Speech on Finance (No. 2) Bill, 2013 –

High End Pensions Protected despite Budget Promises – Golden Circle of Government Wins Again

In last year’s budget speech, Minister Noonan said:

“I want to clarify the Government’s policy:

“Tax relief on pension contributions will only serve to subsidise pension schemes that deliver income of up to €60,000 p.a. This will take effect from 1st January 2014….”

“… The Pension Levy…will not be renewed after 2014.”

That’s what the Minister said last year; now let’s see what did happen.

1. Changes are being introduced, but they fail to deliver on the €60,000 limit that was promised. In fact tax relief will continue to be granted to allow funding of pensions significantly in excess of €60,000—in some cases up to €100,000 p.a. And among the people who will benefit from this largesse are the very Ministers and senior officials who drafted this change in legislation.

2. It would be bad enough if that’s where it ended, but it’s not. The Minister in a written response to my PQ revealed that as a result of not fully implementing the €60,000 limit, the tax savings would be €130m short of his earlier projections (i.e. €250m less €120m). And he went on to say that the fact that the assessed tax savings would have a considerably lower yield…necessitated the imposition of the additional 0.15% pension fund levy. This levy is expected to yield €135m p.a.

There is absolutely no doubt these two figures are directly linked. A taxation shortfall arose from not implementing the €60,000 pension tax limit and it is being directly plugged by introducing a new pension levy. A pension levy that will be indiscriminate in affecting all members of funded pension schemes and not just the better off.

3. So now we have the obscene situation where some on pensions of up to €100,000 will not be affected by the Budget while those on €100 p.w. will – In fact they’ll lose income every year that the levy remains

4. And the final insult is that the Ministers and senior officials who drafted this legislation will not only benefit hugely from the additional scope for accumulating extra pension, but will not lose out as a result of the levy as they are in an unfunded pension arrangement and hence will be unaffected by it.

So, the idea of justice or “we’re all in this together” disappears so far into the distance that by this stage it’s out of sight.

The other completely unfair measure is the treatment of separated parents.

It is proposed to abolish the One Parent Family Tax Credit paid to separated parents in place of a new tax credit as provided for in section 7 of the Bill. This new credit will only be paid to one parent. This has serious consequences for working parents, and in particular fathers.

4,000 people, including some on the minimum wage, will be brought into the income tax net, and

an extra 5,500 parents will pay tax at the higher rate.

In total, 15,400 parents stand to pay extra income tax next year as a result of these changes.

In many cases parents will face higher tax bills of up to two and a half thousand euro.

Can you just imagine the uproar if Joan Burton had announced a cut of €200 per month to Child Benefit? Well this measure has the exact same effect.

The current system is not perfect but scrapping the tax credit altogether throws the baby out with the bathwater.

It is entirely unfair on responsible fathers, and it will disrupt maintenance arrangements that are often very hard to agree in the first place.

Taken together, these two measures are deeply unfair.

Despite all the hot air last year about €500 million worth of wealth taxes, and big talk this year about ending gold-plated entitlements, what we have ended up with is another win for the Golden Circle of Government at the expense of those who don’t have a voice.

It seems, no matter how bad things get in Ireland, some people never lose.